(Recasts with policy decision, adds details) By Leika Kihara TOKYO, Aug 9 (Reuters) - The Bank of Japan kept monetarypolicy steady on Thursday but cut its assessment on exports andoutput as companies feel the pinch from slowing global growth,signalling its readiness to expand stimulus again if risks tothe outlook grow. The central bank also maintained its warning that the globaleconomic outlook remained highly uncertain, with improvements inoverseas growth seen limited in scope. "The pick-up in exports has moderated, while production hasbeen relatively weak," the BOJ said in a statement announcingits policy decision. That was a bleaker view than last month,when it said exports and output were picking up. As widely expected, the central bank kept its key policyrate in a range of zero to 0.1 percent and refrained fromtopping up the 70 trillion yen ($890 billion) target for itsasset buying and loan programme. Pressure for immediate action has eased with the yen havingbarely moved after last week's better-than-expected U.S. jobsdata, as well as decisions by the Federal Reserve and theEuropean Central Bank to keep policy steady for now. Many BOJ officials likely felt that there is not enoughevidence yet that slowing global demand is hitting exports hardenough to offset strength in domestic demand. "Japan's economy has started to pick up moderately on firmdomestic demand," the central bank said, sticking to itsforecast of a gradual recovery ahead. Newly appointed members Takehiro Sato and Takahide Kiuchijoined the policy debate, bringing the nine-member board to fullforce for the first time since early April. Both of them, formerly prominent economists, have arguedthat the BOJ's price forecasts are too optimistic and that therewas more the bank can do, such as purchase foreign bonds. Markets will be focusing on Governor Masaaki Shirakawa'spost-meeting news conference for clues on whether the two willwiden the scope for bolder BOJ measures to beat deflation.

OUTLOOK MURKY Japan's economy is set to outperform most other developednations thanks to solid domestic demand, with the InternationalMonetary Fund forecasting growth of 2.5 percent this year. That gives the BOJ more breathing space than its U.S. andEuropean counterparts, which signalled acting as early as nextmonth to battle slack growth and heightening market strains. But the world economy is still dragged down by the deepeningslump in Europe and emerging economies have yet to turn aroundfor a sustained recovery, keeping Japanese policymakers worriedabout the impact on the export-reliant economy. The BOJ joins central banks from Australia to the euro zoneand Britain in leaving their policy on hold this month to saveammunition in case global conditions deteriorate further. Having loosened policy in February and April, the BOJ hasstressed that it will act again only if risks heighten enough toforce it to abandon its recovery forecast. It is counting on global demand for Japanese goods to pickup before the boost from spending for rebuilding from lastyear's earthquake peaks. But a growing number of BOJ officialsare now less convinced about the strength of the recovery. Manufacturing activity declined in July at the fastest pacesince last year's earthquake. Exports marked the first annualdrop in four months and factory output unexpectedly dipped inJune as slowdowns in Europe and China hurt demand. Japan's core machinery orders rebounded in June butcompanies expect orders to slide in the third quarter, datashowed on Thursday, casting doubt on the strength of capitalexpenditure and adding to woes for Japan's recovery prospects. ($1 = 78.6600 Japanese yen)